Oil prices and the US economy: Where is the boom?

Vipin Arora ()

No 2015-48, Economics Discussion Papers from Kiel Institute for the World Economy

Abstract: The author argues that the economic benefits of low gasoline prices for the U.S. economy have fallen substantially since the reemergence of America as a major oil producer. The old rule-ofthumb that a 10% fall in the oil price raises inflation-adjusted U.S. GDP by 0.2% is too large - the impact on economic activity should be closer to zero, and may even be negative if consumption grows slowly. The reasons for this change are straightforward, if underappreciated: (i) the value of oil production accounts for a larger share of the U.S. economy; and (ii) consumers are not spending the windfall like they used to because of higher debt levels, limited access to credit, slow wage growth, and an older population.

Keywords: oil price; economic activity; input-output; consumption (search for similar items in EconPapers)
JEL-codes: C67 E20 E60 Q43 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201548

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